Investors cautious ahead of US inflation data | IFCM
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Investors cautious ahead of US inflation data - 14.2.2018

Dow records third straight gain

US stocks ended higher on low volume trading Tuesday ahead of important January inflation report. The S&P 500 rose 0.3% to 2662.94 led by consumer staples and real estate shares. Dow Jones industrial average gained 0.2% to 24640.45, with gains in Caterpillar and Goldman Sachs outweighing 1.3% drop in United Technology. The Nasdaq composite index climbed 0.5% to 7013.51. The dollar weakness accelerated: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.5% to 89.72. Index futures point to higer openings today.

Market participants are watching closely for January consumer inflation data due today at 14:30 CET. A higher than expected inflation will strengthen the case for faster pace of interest rate hikes with Federal Reserve’s plan currently believed to include three rate hikes for 2018. Analysts are expecting a 1.9% rise for headline inflation and 0.2% gain for core inflation which excludes volatile food and energy prices. The market retreat last week was triggered by stronger than expected January jobs report which spurred concerns rising wages will translate into higher consumer prices, prompting the Federal Reserve to tighten monetary policy. The expected rise in borrowing costs will make US products more costly and less competitive and lower businesses investment, both factors acting as drags on US economy. This prospect prompted equity sell-off, with S&P 500 and Dow now more than 7% below January 26 record highs. In economic news, the index of small-business optimism from the National Federation of Independent Businesses climbed two points to a reading of 106.9 in January. And Cleveland Fed President Loretta Mester said the sharp moves in the stock market over the past 10 days remain “far away” from being large enough to damage the economy.

DJI

European stocks pull back

European stock indices resumed the retreat on Tuesday after Monday bounce. The euro and British Pound extended gains against the dollar. The Stoxx Europe 600 dropped 0.6% Tuesday as gains in mining and travel shares failed to outweigh losses in utility and telecom shares. The German DAX 30 fell 0.7% to 12196.50. France’s CAC 40 declined 0.6% and UK’s FTSE 100 slipped 0.1% to 7168.01. Markets opened 0.5%-0.8% higher today.

Investors are waiting for US inflation report for clues on Federal Reserve interest rate path after concerns of faster monetary policy tightening following strong US nonfarm payroll report for January triggered the global market rout. In economic news, the UK headline inflation remained at 3% in January, compared with expectations of a 2.9% reading. Inflation is well above the Bank of England’s target of 2%.

Asian stocks mixed

Asian stock indices are mixed today after partial recovery following heavy losses last week. Nikkei extended losses falling 0.5% to 21143 as yen extended gains against the dollar. Stocks declined as Japan’s fourth-quarter GDP recorded the 8th straight quarter of growth, missing expectations. Chinese stocks are rising: the Shanghai Composite Index is up 0.5% and Hong Kong’s Hang Seng Index is 1.8% higher. Australia’s All Ordinaries Index is down 0.25% with Australian dollar gaining against the greenback.

Brent stable

Brent futures prices are stable today on back of weaker dollar and Saudi Arabia statement Saudi crude output would drop in March. Prices inched higher yesterday after the International Energy Agency forecast strong global crude demand. The American Petroleum Institute late Tuesday report indicated US crude inventories rose by 3.9 million barrels to 422.4 million last week. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories.

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